A Tribute to the Thoughts of Another and his Friend"Everyone knows where we have been. Let's see where we are going!" -Another

Thursday, June 11, 2009

What if?

I am sure this is one of my crazier posts. This is a complete "what if" scenario. Pure speculation. I am not trying to start an Internet rumor. I am simply observing dots and trying to connect them into a picture that makes logical sense.

ANOTHER told us more than 10 years ago that large quantities of physical gold were changing hands [SECRETLY] at the highest levels at a value of $6,000 per ounce. This was back when gold was trading on the "free market" at less than $300 an ounce. Dot #1.

China recently announced that it had increased its gold reserves by 454 metric tonnes from 600 tonnes to a total of 1,054 tonnes. Dot #2.

Japan is a tried and true member of the dollar faction. But it is also a geographical and racial member of Asia. So if Japan wanted to follow China and make a move away from the dollar for self-preservation purposes it would need to do so surreptitiously. Dot #3.

The WGC and IMF report that Japan has 765.2 metric tonnes of gold reserves amounting to only 2.2% of its forex reserves. This is less gold as a percentage of reserves than Latvia has! Dot #4.

Two Japanese nationals are arrested in Italy trying to "smuggle" into Switzerland $134.5 BILLION in US Bearer Bonds! Link. Dot #5.

So let's do the math. If super large quantities of physical gold were moving around at $6,000 an ounce ten years ago, what would be happening now? My guess is $10K per ounce. So how many ounces could you get for $134.5 bn? You would get 13.45 million ounces. In tonnes, that is 418 metric tonnes. Add that to Japan's 765 tonnes, and Japan would have a total of 1,183 tonnes, regaining its lead over China by 129 tonnes. Japan's lead over China was 165.2 tonnes before China's recent announcement.

Please let me know what you think about this crazy theory. The way the math worked out surprised the heck out of me. The math is what made this worth posting!

100 comments:

Why is mathematics applicable to reality? (Yes, two plus three equals five in my mind,but why is it that when I add two apples to three apples, I obtain five apples?)

Why are such beautiful formulae as E=MC2 applicable to reality?/

Spontaneous logic is the order that the human intellect follows naturally in knowing reality. Its purpose is to know the "Truth". The art of logic directs the reasoning process so that may attain knowledge of in an orderly way, with ease and without error. The science of logic is directed towards the acts of reason insofar as reason is ordained to the knowledge of "Reality". Logic provides the framework through which we filter common-sense data in order to arrive at an objective "Truth" about "Reality"

The sum and substance of the "Keynesian Revolution" was the thesis that intuition provides a better framework than logic to filter data. John Maynard Keynes said that there "can" be an unemployment equilibrium on the free market. Keynes, who died in 1946, felt that there was “something” that could be done that would improve the current situation and he went on to advocate constant and increasing deficits and to advocate a rapidly growing governmental sector.

As John Rawls would in 1971 argue at the end of section 4 "The Original Position and Justification" (page 19 of the 1999 rev. ed.) of his " A Theory of Justice ", we collect together into one conception a number of conditions or principles that we are ready upon due consideration to recognize as reasonable. We do this on the basis of Poincaré’s dictum that " il nous faut une faculté qui nous fasse voir le but de loin et cette faculté c’est l’intuition", said Rawls.

Seen from far away, most of the practical conclusions of Keynes therefore seem to harmonise with what seems to the man in the street to be the dictates of common sense.

It is a bit strange that this story actually became public, Italy would have certainly kept quiet if they really wanted to, the keep stuff quiet there all the time, that basically is their main competence.

yeah, sorry to ivo....but martijn, my logic and intuition tell me something is fishy in italy. not sure exactly what. good sniffer on the fiat deal.

this looks like a setup to put pressure on the US, by making it seem as though one of the US's allies is bailing on them as well. or that they were operating for their trilateral brother in monetary arms.

ivo, this is why i have just as much of a problem with logic as I do with intuition. logic can create an infinite number of possible scenarios for any given set of facts, just as intuition can. they can be just as contradictory as well. most of our greatest scientific and technological achievements were obtained via intuition and imagination, rather than science and deduction.

hence, keynes MAY be right that there might be SOMETHING that can be done, even if he didn't figure it out. unfortunately for him, the things he did suggest haven't worked out very well so far.

sorry to go all philosophy-of-science in here, but I just think sometimes we see logic and science as gods and saviours when we needn't. many of the previous cultures who gained amazing insights into mathematics, astronomy, architecture, ecology, etc. did so via various forms of intuition in combination with logic (or some hitherto undiscovered means of "knowing.").

w/that said ivo, i enjoyed reading your thoughtful post. (even if i need a translation for rawls).

When I heard about two Japanese caught with $134 billion in bearer bonds, my gut feeling was that the bonds were authentic, not counterfeit.

The next question was who owned the bonds. Japan seems to make sense. So then why are they transferring such a vast sum of money? My conclusion was that they are trying to covertly liquidate some of their dollar foreign reserves. That meshes with your theory: they are liquidating dollar reserves and buying gold.

dave, i not sure the LRC adds anything new here. it seems possible, even likely, based on the story told the public so far that one of those theories is right (and i had thought about china using japanese ops, but thought they'd use others).

but something just doesn't seem right. it's too public. italy's taking this action would really piss the US off, because it's a story which could haven been buried, like so many others.

it's quite possible the event was used by the EU to fire a shot at the US, to damage their public image considering the policies coming out of the US. and this is where i'd lean.

but it still reeks to me of why does this story get out? who stands to benefit? what background do these two carrying the money have (for which intelligence or banking agents)? are the bonds real?

too many other thoughts, but will leave it here for the moment.

I like the theory though..just think it's a little too obvious and that's its charm.

"If The Fed is dealing through one "special trader" at State Street, then all such transparency of action and intent is GONE...

Worse is that if this is true and is proved, the risk of capital flight is extremely high. Do you want to participate in a market that is "rigged" like this by The Fed, operating with essentially limitless liquidity to game the markets any time they'd like, in violation of the law?..."

"...Federal representatives may have opened multiple undisclosed-type accounts with none other than State Street Global Advisors over the past few months. All of these accounts are allegedly handled by one single trader, who is cocooned and isolated from interaction with other partners..."

It's also on Huffington Post now. Between these three sites, it is getting a large readership!

As I have said in the past, this will be the story of the century when it breaks and its true meaning sinks in. And then it will kill the markets, dead!

Indeed it is curious that the TARP funds amount to precisely what was found, and that by new observation TARP is now much lower... I don't subscribe to conspieracy theories often, but this wreaks a little much.

I think one of the key questions about the $134.5 billion found is what it would be spent on. FOFOA suggests gold as one possibility; though viable, I think his most recent comment holds many answers. This money was destined for a purpose. It's fulfilling this purpose now.

I would propose that the new US alliance with FIAT might offer light... grease to ensure the merger's success perhaps? Financial insurance so that FIAT's success is guaranteed and the US Gubbermint gets applauded instead of egged?

The smuggling, discovery, and location were planned. No nation smuggles 134.5 Billion in a false bottom suitcase. It's a facade to legitimize the transfer of wealth.

When no nation claims ownership of the bills (and they won't), the windfall can be celebrated. How fitting.

US Bonds kept by Italy = Happy Sheeptalians and neutral Amerisheep

Reward kept by Italy and bonds returned to the US = Happy Sheeptalians and happy Amerisheep.

Criminals are good at hiding tracks. Audit. Audit now. Leave no time for the cover up. This robbery is in plain view.

The Italian government was involved in the trade. Either this coin was destined to go to them, or it was to be shared with them and FIAT. Either way, this wreaks of organized crime, and this time it's not the banksters.

But I will leave it out of my review ofFriedrich August von Hayek, Contra Keynes and Cambridge: Essays, Correspondence (Collected Works of F. A. Hayek)

which should appear by the end of next week herehttp://www.amazon.com/Contra-Keynes-Cambridge-Correspondence-Collected/dp/0865977445/ref=sr_1_1?ie=UTF8&s=books&qid=1244856364&sr=8-1

(On a serious note: Thank you for having drawn my attention to the fact that my Rawls thing was not understandable.)

It is perfectly appropriate that Keynes is so widely associated with his famous dictum ‘in the long run, we are all dead’; he did believe in most cases that there were ways to improve the SHORT-RUN performance of the economy.(Bradley W. Bateman, “Keynes and Keynesianism” in Roger E. Backhouse and Bradley W. Bateman, eds., “The Cambridge Companion to Keynes” Cambridge University Press, 2006, 271, p. 275)

I, Ivo, continue to think with Harry Hazlitt that the art of economics consists in looking not merely at the immediate but at the LONGER EFFECTS of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups. http://jim.com/econ/chap01p1.html

My 2 cents :- Japan is global $-saver N°1.- Italy is the OTC gold-handler N°1- When the goldprice started its take off (1999/2001), the (famous) Japanese housewifes started to accumulate (massively) 1 Kg bars.- The WGC was (unofficialy) furious about this fenomenon getting out of (their) hands (learned this by accident).

>>> Most probably, the possible secret $-gold exchange was leaked !?

No possible gold-positive perceptions may surface before the right time (!?)

I interpret it as a recognition of reality. A survival instinct. Perhaps even a planned event.

But I see this as different than a solution or a construct.

I view the future with freegold to be a very beneficial place for producers, savers and average people. But a more difficult place for politicians. "Constructs" and "solutions" come from politicians. CBs are politically driven on the surface, but perhaps they are selfishly driven under the surface.

The RECOGNITION of freegold in advance is very valuable. This is the motivation I see for the ongoing CB gold actions.

I differentiate between 1) the benefit of living in a freegold world, and 2) the benefit of owning gold THROUGH the transition to freegold.

If freegold was a solution or a construct, PEOPLE would be encouraged to buy gold. As it is, secret accumulation by CBs is a selfish attempt to benefit in the transition, and to gain power and influence on the other side.

So what you are suggesting is an attempted exchange (cash for gold at a very high exchange rate) between Jp and organized crime (illicit gold?). This exchange was leaked to authorities before it could happen and the Jp's tried to flee to Switzerland with the cash, but the border guards were tipped off.

This has a very pleasant ring to it. It answers some logistics questions I had, like why go through Italy? And what tipped off the police?

VAT on bullion : That is an ECB directive. Even the UK (no EMU member) agreed. Turkey is (hesitantly) following. It all started when LBMA went public. In most EU countries one buys goldmetal at the local bank and is physically delivered by the bank.

I was using Jp as an abbreviation for Japanese not JP Morgan. (Or is there something else I am missing with JPMorgan?) And yes, how this plays out from here should provide more clues to the truth. Since it has attracted press coverage, there should be more information leaking out. It is difficult to get a cat back into the bag once it is out.

interesting articles there. btw, denninger's perspective sounds intriguing. and he always has a sharp sniffer (on most things at least).

also, i can confirm ZH's letter from Mr. Shoichi Nakagawa as authentic! apparently his cousins had written to me from nigeria on his behalf w/the exact same request. i'm truly glad he found someone else to deliver these bonds, or, otherwise, owing to the fact that I was adopted into a Jewish family, this would turn into some kind of modern day Dreyfus affair...and "my people" wouldn't be very proud. then again, they're said to own the banks and the world...so clearly i'd be presented w/a "get out of jail free" card, and hopefully a check from TPTB for all my work living as a Jew for 30+ years of my life.

Usually, story-telling is a method reserved for those working with lingusitical tools to create literary works of art: prose of poetry along their visual conuterparts of paintings and sculptures. We receive ethical compensation during the process of mental recognition of black characters on a white background. It is a satisfaction that becomes possible due to the human's capacity to abstract a concept or visualize a situation - indeed reading literature is mentally not very different that complex algebra or geometry. One however needs to be of a certain age, with the accopmanying life experience to fully appreciate, for instance, the old man's battle with a fish in a personal context. Learning the new is not the prime motivator when we are required to read Hemingway or Tolstoy in school, it is rather the understanding of the current.

But why do we feel attracted to thrillers, spy stories and conspiracies? One can argue that a good thriller simply provides entertainment - the necessary daily dose of distraction, of an escape in a more "just" and simpler world substrate where the grim reality of billions of people each with a complex personality, acting in even more misterious ways is magically substituted with a logical, reasonable environment where (very) lucky heroes act. But is reading a good Clancy then equivalent to sitting in front of a screen watching the Zeigeist? Better question is whether the satisfaction we get is of the same type.

I think that it is not. Reading a conspiracy gives one a mild religious feeling. It also helps us to identify withing a given group, a most necessary social activity to keep ourselves mentally healthy. We also get a "kick" when our egoes are pumped from the realization that we are in some way special - privy to "secret" information inacessible to many. And here we find the roots of the stereotyping of those "many" through the construct of a J6P - another attempt to made ourselves special and separated from the average. Not all of us are like that fortunately.

Reality is complex, unapprehendable and unpredictable. Economics is an ecology and not something Keynesians and monetarists can control, no matter how much faith we place in them as Richard J. Maybury [a href=http://fofoa.blogspot.com/2009/05/what-obama-does-not-know.html]says[/a]. It is, in ways, similar to the spectacuraly failed attempts to create Biodomes in the 80s, an activity in great contradiction with the theory that gave birth to it: Gaia. We cant control a small eco-system and let alone the complete economy. One may say: "But wait a minute. We create and indeed control vastly complex systems, from the Space Shuttle to the newest Intel microprocessor. " Yes, but we create those things. Most engineering sucesses are partly based on tricks and various ways to make Mother Nature to yield to our wishes. It is what engineering should be called: the activity of structured coercion of Nature. We can not control her nor Human Nature (or Human Behaviour, whichever side of the nature vs. nurture argument you subscribe to) if it fights back.

Subconsciously realizing the above, that reality is beyond individuals, some find comfort in conspiracy stories and yes, even religion - though the last has also more important social functions.

The above aside, we all indulge in conspiracies and then try to rationalize our belief. We measure their truthfulness. Sometimes, we were correct in what we believed. This is a positive outcome, indeed the possibility of discovering the Truth is what attracts greater intellects to stroll the halls of crackpots. We try to find a needle in a haystack, glimpse the fire through the smoke, identify a common denominator which connects our personal beliefs, stereotypes and cultural biases with the very scarce true facts "out there".

It is somewhat different when you research the facts yourself and present them, always biased (we cant avoid that), but with recognition of the latter. This is investigative journalism of quality. But, is the distinction with a tin-foil story only to be find in the measure of sucess as demonstrated in a justitial process? Are facts and truths easy to establish as such? Here think about the methods in legal practice where testomonies are bought with promisses of smaller penalties. The line gets blurred and this is where most conspiracy followers fail to follow through. Or where new conspiracies are born and the chaos of disinformation roams. At this point decisions are made whether a certain story will be told or not. Remember, the winners write history. However, history has a habbit of sometimes surfacing back so that old tabs are paid and new ones written.

LONDON, June 11 (Reuters) - Central banks may be justified in increasing their gold holdings to 40-50 percent of their reserves, a senior executive of the industry-funded World Gold Council said on Thursday.

'Central banks are justified in having high gold weightings. They are justified in having a 40-50 percent weighting in gold,' Marcus Grubb, WGC's managing director of investment, research and marketing told delegates at a conference organised by ETF Securities.

>>> The WGC...justifying 40%-50% gold in CBs !?Is this a message/hint ? And why suddenly such a (very) high percentage ? Why only CBs and not mentioning the people ? Why not more details on this sudden justification ?

By the way, the story about the Italian seizure of bonds starts to ring a familiar tune, establishing connections with forgers and cults in the Phillipines. The resonance I suggest is with the OITC conspiracy story that I wrote about some time ago as a comment on this site.

The gold move is action due to a lack of faith in other assets. Businesses provide risk and no return, currency provides risk and depreciation, and t-bills aren't safe either. Securities and whatnot aren't even worthy of mention. CBs are looking for a safe retreat. They know this won't be a v recovery; ell, it won't even be a w.

Here is my Thought. CBs are obsessive balancers. They are constantly paying attention to the balancing act role they play in international currency markets.

Now look at this list from the WGC (the issuer of that statement). It lists official gold reserves with only two columns. Tonnes and "% of total forex reserves".

Two Thoughts come to mind. The first is that the EU, the US, Germany, France, Italy, Netherlands, Portugal, Greece and Slovakia are already above that "recommended percentage". So taken literally (which I don't think it was meant), these members could sell a whole bunch of gold.

The second Thought is that as paper burns and gold becomes Free, the tonnage column can remain the same but the percentage column will spike. This is why the EU already lists at 76.5%. Since its inception, the value of its 15% gold reserves has tripled, while the value of its dollar reserves dropped.

I think (hope) that this statement by the WGC is a RECOGNITION of the pattern and meant to calm these neurotic balancers as they watch their percentages rise.

% tonnes/forex reserves : I am almost intuitively sure that these WGC (%)figures are very "creative" (misleading). I have no evidence for this feeling.

It is the message that intiges me.Think that the leading $-IMFS wants to warn that hyperinflations (plural) are coming throug currency devaluations.

And maybe they want to hint that the(ir) creative %-figures (> 70%) (should) indicate that no more substantial goldprice rises are needed for balancing (?).

But,...there is a distinction between considering the ESofCBs and the ECB ! And how much creativity has been used with forex reserves ? And how relevant is this comparaison ?MTM-Goldreserves should be compared with the ECB's €-digit creation. EMU doesn't need $-reserves (eurodollars) anymore ! The euro is our reserve-currency, now.

What about all the other countries with very low gold reserves and high monetary expansion ?

Let us not forget that at present the US$-index is hovering (again) around its 40 year old Maginotline of 80 ! An extremely psychological important median number (make or break).

$-Devaluation will (should) come as a complete surprice. The $-regime wants to avoid shock anticipation by the main dollar surplus holders.Also note the rise in oilprices (= $-devaluation of its global purchasing power).

Medvedev has been talking about the importance of gold reserves, once again...and he wants Chine in the same gold-bed.

Cannonfire does a very good logical analysis. His point #2 which he dismisses as preposterous is something I have been wondering...

"2. The bonds are real. Maybe there is such a creature as a Federal Reserve Bond. It's not just a theoretical possibility; they've been around for decades. But they are traded on a very august level, far from the sight of we ordinary mortals. Thus, there is no mention of this type of bond in Wikipedia or on any other "respectable" web site. The Federal Reserve of New York is lying when it claims that such bonds do not exist."

As I have mentioned the banking system is based on reserves which boil down to either physical cash, or digital credits HELD AT THE FED because the Fed is the only bank in the world that can [legally] turn digital credits into physical cash.

Actual reserves (cash) just sit there. They do not earn interest (until recently when the Fed started paying interest on reserves held in its "vault"). But each bank MUST keep (non-interest-bearing) reserves. The easiest way to think about this is all the cash in every BofA ATM machine and teller drawer in the world. This is the (non-interest-bearing) reserves of BofA that are NOT held at the Federal Reserve.

My thought is that in the highest echelons of the banking world, mostly made up of central banks (like the BOJ), there must be a way to move physical reserves around (to balance net imbalances) without the need for semi tractor trailers full of $100 bills. This would be non-interest-bearing cash in very high denominations issued by the Fed (the only bank in the world that can issue US$ physical cash).

We the public, including Wikipedia and all the media, would not necessarily know about the existence of these instruments for security reasons. They only need exist and be recognized within the community of super-elite banks.

This would not be the same thing as the US issuing debt. Or even the Fed issuing its own debt. Let's say the BOJ wants to withdraw a couple billion in cash from its reserves at the Fed. The Fed might ask what denomination the BOJ wants depending upon its purposes and then simply issue the cash. Call it a bond, a note, whatever. Within the banking world this is now a cash reserve with no ties to the electronic system, just like the cash in your wallet.

Of course I am just speculating.

Interestingly when I saw this "one billion dollar federal reserve check signed by Ben Bernanke" linked on GIM my first thought was the OITC because of the Thai name on the check. I had to go look up the website to see the guy's name. The guy on this "check" is Mr. Joseph Teo Hui Kiat. The OITC loon is Dr. Ray Chhat Dam. Dead end there. But curious that it was my first thought.

I admit the Philippine story seems to have a high probability. But there are still some nagging questions in the back of my mind that have not been answered yet.

Thanks for your Thoughts on Story-Telling. Incidental to your comment and to Ivo's, my first thoughts on this concept were intuitive. From there I applied logic and math. I would not have posted based on intuition alone. And I am still open to several possibilities depending on the flow of new information.

That is very interesting because you speak of cash i.e. MZM (zero maturity money). It used to be M0 but I think they changed the classification recently.

The interesting part is that M0 has excellent correlation with the POG. This is probably because M0 is the closest measure of hard currency i.e. it is at the bottom of the inverted pyramid right above gold and other very liquid assets.

Maybe the creation of such hard currency is still tied to gold and its derivatives somehow, but we are not told.

You have been gone a while so I don't know if you read my post about the Bermuda Triangle. It dealt with the M0 (more correctly called the monetary base), and then in the comments section Christian Pickett brought up the MZM. See also my response to Christian.

A list of forex reserves by country (denominated in US$) as reported by the IMF is here.

A quick spot check of Japan reveals this is how the % portion of the WGC gold list is calculated.

Japan's 765.2 tonnes is worth $23bn at $955/oz. That is exactly 2.2% of Japan's $1.009tn in forex reserves.

Of course the gold is self-reported and forex is IMF reported, so there is certainly room for "creativity".

The important thing seems to be that any statement by the WGC must be taken in the context of its published data, whether it is creatively presented or an honest attempt at record keeping.

The message is certainly intriguing, and one can assume that its intended audience is capable of understanding its meaning.

In the WGC message, the word "JUSTIFIED" jumps out at me. TWICE. Also, the conference was for ETF Securities. Were they the intended recipient of the message? Or were the CBs? Or the public? All of the above?

Perhaps those at the top that know for a fact that the devaluation/hyperinflation is coming are starting to feel pressure to get "disclaimers" out in the press, so that they are not blamed when it comes... "Don't look at us, we told you to increase your gold reserves to 50%!" (WGC)

"Don't look at us, we sold you gold through the banks with no tax." (EMU)

"Don't look at us, we told the world we just doubled our gold reserves." (China)

"Don't look at us, we've been talking about the importance of gold reserves and encouraging China to join us." (Russia)

"Don't look at us, we tried to get our gold back from New York." (Germany)

"Don't look at us, we tried to get our gold back from London." (UAE)

"Don't look at us, we tried to sell you 400 tonnes." (IMF)

"Don't look at us, we tried to diversify into more gold, but the damn mafia turned us in." (?? :-)

Absolutely devaluation will come as a surprise. As you say, "Devaluations always happen by complete surprise as to resort maximum leverage effect."

If they announce it, (like IMF gold sales) you know there is an ulterior motive. When it comes like a thief in the night, there is no warning. Perhaps these are subtle/subliminal warnings for those who missed another.

As for the link with the Philippine story, here is another link that might interest you (it's in Dutch which I take will not be a problem for you). This link is a translation of an interview that Lindsay Williams had with Jonathan May. It basically boils down to the US having tried to get the Philippines to ditch their own currency and use the dollar instead.

Max Keiser argues about the bond found in Italy that they were to ensure the BIS - located in Switzerland - to fulfill its Basel obligations and that they probably came from an unknown central bank somewhere.

Here is the link.As I'm unable to see time I don't know exactly were the fragment is. It's probably at 8min or so.

German credit crunch deepensGermany's top industrial group has warned that credit conditions are going from bad to worse across much of the country's manufacturing base, dashing hopes for a swift recovery.

>>> Same story for France !

The great(er) hyper-reflation time comes faster and closer.Exchange your fiat-digits for wealth-tangibles...while you still get a lot of weight for relative strong fiat.

Especially if the Fed soon shifts QE into high gear in a risky bid to regain control of escalating yields, a very potent debasement of the dollar will result. Exiting from the policy when hyper-inflation rears its ugly head will be very problematic for the Fed. A full-blown dollar crisis could well result only a very few years down the present path. Hence, the central banks generally don't want the Fed to continue down this risky path. But if it does, or even shifts QE into higher gear, the central banks will gain even much greater impetus to divest of their longer-dated dollar holdings.

>>> The global, in relative concert, management of the $-IMFSbecomes increasingly difficult and risky.It is against this evolving background that we have to interprete the messages.

Who's left to still believe in the pro forma good governance of the $-IMFS ?

SNIP"And what happens if the Goddess of Inflation suddenly takes it into her head, to take off? This is, after all, her fundamental nature. She loves to fly, the faster, the better. Zimbabwe already melted down and no longer honors her by adding endless zeros to worthless paper currency. So she needs a new victim.

Geithner is daring everyone. He thinks, he can wait until the last second and then stop this extremely powerful Goddess who eats empires for lunch, by tweaking things a tad! Yes, this is true delusional thinking."

The biggest delusion of all is that these "Finance Ministers" actually think they are controlling things and that they have the power to fix things. They have only a blunt, primitive tool and they only destroy. Sometimes slowly, sometimes fast!

"Especially if the Fed soon shifts QE into high gear in a risky bid to regain control of escalating yields, a very potent debasement of the dollar will result. Exiting from the policy when hyper-inflation rears its ugly head will be very problematic for the Fed."

To use your words, I am "intuitively sure" that Bernanke/Geithner have recently developed a taste for the COVERT.

Bernanke MUST be aware of the catch 22 he is in. I am "intuitively sure" that he now believes covert ops are his secret back door.

If only we could see a graphic illustration of Open Market Operations versus Covert Ops. I think we would all be SHOCKED.

I can't believe the dollar is still responding favorably to all the rhetoric out there. It's insane. Today the dollar gained ground on what... words from dollar sellers like China and Russia? We have actions that dictate otherwise, as well as words over the past several months.

I can see this being a pump 'n dump

I expect this is the 2nd world realizing their alternative trade system needs time to mature

Regardless, this is NOT recovery. China, Russia, and other developing nations have not just "seen the light." The way of their future rests not with debtor nations unable to even service basic consumption. These nations won't keep shipping more in trade for risky fiat... there is much more to this show than what's seen center stage.

Max has an interesting theory. As he says, it doesn't matter whether they are real or counterfeit, it's ALL counterfeit. Whenever you get around to reading Another, you will find that he said 10 years ago....

...As for the US$ and T- bills held overseas, “they don’t really exist”!

@ John : There is soooooo much at stake for the $-IMFS that we better have a second opinion (perception) about the nearby future of the so called 2nd world.

When the virtual dollar loses his functionality as global reserve and trade settlement unit and the 2nd world unites under great (Asian/EU-?) leadership,...we might soon have to settle a lot of trade in local currencies instead of using the single world currency ($). (Cfr. Liu insights)

This past decade had so much gold-action & talk,...that something goldisch will surely happen.

That's also the reason that we see so much illogical things (financial/monetary), happen.

@ FOFOA : All $-units outside US borders are NO legal tender and have only a protocalair worth ! Indeed,...this $-fiat (& derivatives) actually doesn't exist. Max is absolutely correct in stating "counterfeit".

About "covert ops" : The ongoing massive manipulative interventions (QE) are already enormously "shocking" for those who want to see them for what they are !The Big gold-shocks can't be that far away. And these gold-shocks must be the biggest of all,...simply because they all are eagerly hiding them so well.

The scorched-earth, save-your-own-ass policy began at the very beginning. It is still continuing, but the end is near. You know the end is near when the covert is right there in-your-face. Without fear of reprisal.

Hyperinflation/devaluation/dollar-collapse will cause so much worldwide chaos that people like Dick Durbin, Hank Paulson and Ben Bernanke will simply walk out the back door and retire in comfort.

Not exactly Oscar-worthy, but some interesting fiction and kind of on topic! (Iran, China, Israel, Italy (mafia?), weapons dealing, International Banking (BIS), control of countries through DEBT, etc...)

Alek : The list of US' operations for regime change is already enormous. Iran was already 3 times on this list. These operations don't affect the $-exchange rate, at all.But these operations cost tonnes of unproductive $-units. That's how empires desintegrate and have their currency dramatically reduced in global importance.

A Freegold wealth reserve system would dramatically reduce wars. That's why so much effort goes into keeping the dollar up.

Ah anony, I thought it happens the other way around. The $ must look credible on a day when "regime change" is (probably unsucessfully) on the agenda. Also G8 statements etc. come in handy on a day like this. But no matter how they spin it, those trillions with large notional/market value spreads hang low like the constant summer rain clouds here in NL.

FOFOA, I havent seen it. But I read the synopsis/revies on IMDB. Who knows, maybe we watch it on a movie night with friends. The ideas are of course a collection (a mingle) of all those conspiracy stories out there. The thing I hate is that the writers do not try to send a message anymore, they just make films for entertainment, incindentally using sparks of truth here and there. The new James Bond (with Ecuador) is quite the example.

And by the way, when I am silent it doesnt mean I abandon the blog. Just that I have little to contribute either due to work, lack if energy or I am vacationing (we have 30+ days per year here in NL, who says that debt-driven political economy has no advantages - heh anony?). The last will be the case from friday for 2 weeks actually. The last weeks I have been depositing thin films in the lab and calibrating stuff - incidentally today I worked with gold.

An "indirect bidder" bought $5.38bn in 30 year bonds on June 11 bringing rates down slightly. Here is why the Fed did that COVERTLY. This is SECRET, UNAPPROVED QUANTITATIVE EASING [SECRET PRINTING]!!

From The Privateer...

THE LIT FUSE ON THE US DEBT BOMB

Thursday and Friday - June 4 and 5 - were tumultuous days in the huge US bond market. The yields on Treasury paper of two years or longer soared skyward. They got routed. Losses for holders of this Treasury paper were estimated to be in the 20-30 percent range over just those short days.

There Is No Safe Place On The US Yield Curve:

At the short end of the Treasury curve, the Fed still exercises some control but nobody knows for how much longer. With longer term (two-years or more) paper, the situation is dire. Prices for 10 and 30-year Treasury paper (which move inversely to yields) are down 8.58 percent and 24 percent respectively for the year to date. For months, buyers of US Treasury debt have been going to the short end, the Chinese in particular, while shying away from longer-term paper. But even here, the recent falls of the US Dollar are making Treasury paper anything but “safe”.

The Burning Fuse To The US Debt Bomb:

In the week ended as this issue of The Privateer goes to press, the Treasury rolled an additional $US 131 Billion in brand new debt paper down the street. With yields right across maturities having risen the previous week - with commensurate price losses - the point is getting close where the lit fuse on the debt bomb will reach the ignition point.

The signal for the US debt bomb going off will be a Treasury auction where there is an insufficient amount of willing buyers - which means part of the issue is left unsold with some Treasury paper left on the counter. At that point, the only remaining buyer will be the Fed. To “buy”, the Fed will have to create HUGE amounts of US Dollars out of thin air.

June 5 - The Day The Fed Lost Control:

On that Friday in New York, the Fed lost control over even comparatively short-term US interest rates. On that day, the market yield on 2-year Treasury paper exploded upwards from 0.95 percent to 1.29 percent. That’s right, the yield on the two-year paper moved up by 36 percent - in ONE day! On the same day, the yield on Treasury 10 and 30-year paper rose 12 and 15 basis points to 3.83 and 4.63 percent respectively. The US and world markets for “official” debt paper issuance are now pushing back. Very soon, spendthrift governments around the world will find that they will have to offer higher rates of interest than before to get the money. If they cannot borrow, they must cut - SPENDING.

The biggest current global “bubble” is US Treasury debt. that bubble has been punctured but it has not been deflated - yet. The fuse is burning closer to the US debt bomb. It explodes when Treasuries crash.

The "usual suspects" [the Chinese] who didn't show up are probably wondering who that indirect bidder was.

Still a long way to go before reaching the finale (collapse-?).Present $-strength is on the back of weak EU. But it is the entire globe that keeps on weakening and the temporary (relative) differences are totally irrelevant.

So, another round of talking it ($) up was on the order of the day.

Ambrose is simply telling us that the enormous domino-field needs MUCH more QE simply to stay upricht. But the economic Crisis is dragging everything into the infernal spiral down...

A new realisation has dawned among the most fervent advocates of financial analysis and collective investor wisdom – markets are not always rational.

For the past five decades, the Chartered Financial Analyst Institute has been teaching the tenets of analysis based on efficient markets to tens of thousands of adherents around the world who work in the banks, fund mangers and investment houses that make-up the global financial system.

>>> The entire "-global financial system-" now stands on the completely rotten fundamentals of a "-virtual model-"...MODEL !

Euroland banks have been terribly stupid ! They all stepped with both feet (and eys wide open) into the deadly AA trap of finance capitalism . The totally absurd glorification of the virtual financial industry.

We better cover this up and remain absolutely silent about it. Let the masses remain totally ignorant...given the evolving economic disaster on top of this bank-system scandal.

Also note the following event now taking place :

There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, “the most important meeting of the 21st century so far.”

On the Ambrose article: our British friend seems to have picked up his favorite pass-time (Eurobashing) again and is having another go at Germany.

Fears that Europe may set off yet another credit crisis triggered a sharp retreat from "reflation trades" across the globe, with funds scrambling to take profits on equities and commodities after the exuberant bull run since March. US crude dropped $2 a barrel to $70. The Dow industrials dived 200 points on opening, eventually closing down 187 at 8.612, while Frankfurt's DAX fell 3.5pc.We were having such a well-founded rally that a "correction" (further decline) was highly unlikely. One can think of absolutely no other reason for the decline than the one given by good ol' Ambrose.

Hans Redeker, currency chief at BNP Paribas, said Europe's banks missed a chance to rebuild their capital reserves during the credit thaw. "US banks have raised $85bn since the stress tests, while Europe's banks have raised just $7.5bn. This is going to go pear-shaped in coming months as people lose confidence in the whole crisis management of Europe," he said.That is quite a broad interpretation of the term "raised". I guess all Madoff did was also "raise" some money. Nothing wrong with that now is there?

The report said accounting rules were lax in some countries and there may be "under-reporting". There is a risk that "write-off rates could increase by more than currently anticipated". Europe really should take an example in the US or UK with their tight and transparent banking oversight.

The ECB advised banks to take advantage of state support quickly to protect themselves from "contagion risks". "There is no room for complacency," it said.The ECB should be trusted at all times. It's being run by this great French guy who's quite fond of helicopters and the ECB has warned of the current crises for years and every possible action to prevent it was timely taken.

As for Germany resisting bank transparency: I'm not so sure whether a French promoted transparent stress test is that great and transparent a thing. As such a test is costly in time and resources, has a chance of widening the gap on economic policy in the Europe and might easily get abused in founding imbecile policies afterwards I might also stay away from it if I were German.

Trader Dan on JS is saying what I also said a bit earlier: Crude is trading more as a currency than a commodity.That's why there are so many ships floating around filled with oil. Some people choose to store their wealth at sea instead of a bank account.

I have a thought about Central Banks holding more gold. This may be a simple safety mechanism. While the USD is a global trade medium, CBs will receive and have to process these dollars. They must be pushed out in some form, but demand for these dollars wanes. China is buying metals and other resources as quickly as they can, but what safe assets can Central Banks buy?

Palladium, gold, silver, and PMs are the order of the day. They're seen as money, so banks can buy in without drawing attention. Were they to purchase oil and other commodities, panic would ensue.

With 40-50% or more in gold, a bank can withstand currency risk. The same cannot be said of those that hold only fiat.

I see the strangest stats coming out today. The USD is dropping, but stocks are not picking up the slack and gold isn't either. I'm assuming the shift is into foreign currencies, but I've not checked. At any rate, the typical pattern when stocks fall with the dollar is that gold rises. A delayed reaction I hope.

Anyone have an idea when GIM registration will reopen? I know they say random, but I'm kind of hoping a GIMMER will open a thread asking to reopen reg, or that someone might know the pattern. I have info I want to share on Survival preps that isn't on the site.

The $-system watches very closely what is "done" with these sterilized amounts of dollars...regardless of any talk about reserve status, currency baskets, etc.

Any move these UST-holders might want to make will meet obstructive action from the $-guardians.

>>> There is only ONE concept that can balance the systemic rise of these external $-reserves : CB gold wealth reserve that is marked to market.

If the $-system & regime cannot guarantee the international buying power of the systemically accumulated $-reserves,...we switch to the freegold wealth reserve !

The main difference between Russia and China is the fossil energy within their territory. A higher energy $-price is nice for Russia but not so for goods producing China. The POO governance cannot serve both $-reserve accumulators.

These and many other global imbalances cannot be brought into balance with the $-IMFS. Something has to give, some day. Medvedev keeps hammering on this fundamental. The so called 2nd world makes efforts to align on what they have in common : With the $-system if possible,...without it if nescessary.

From a dutch source I read that investment group 36 South Investment Managers Ltd. wants to start a hedge fund speculating on hyperinflation. On of their managers is Jerry Haworth - born in Zimbabwe - and the group had previous succes with their black swan fund. The fund will speculate on rising commodities and stocks and a depreciation of bonds a increased currency fluctuation. Haworth personally believes inflation to rise to 10, 15 or 20 percent or even higher.

It it a good thing the market taking such action as it might helps in balancing things. Besides that it is off course an interesting development, especially combined with China and other countries reducing their Treasury bond holdings.

The same way the oil crisis was a result of a shock to settlement practices in 1971, today's crisis may be a result of the shock to settlement best practices in 1909, when the clearing mechanism of debt build-up was eliminated by the passage of legal tender laws in France and Germany.

This forced the world into a system where debt was never liquidated. It simply piled up. This pile-up has accumulated for 100 years and has now gone parabolic. What comes after a parabolic rise? The 100 Year Clearing.

June 16 (Bloomberg) -- Brazil, Russia, India and China are considering buying each other’s bonds and swapping currencies to lessen dependence on the U.S. dollar, Russian President Dmitry Medvedev’s top economic adviser said.

YEKATERINBURG, Russia (Reuters) - The International Monetary Fund (IMF) should expand the basket of Special Drawing Rights to include the Chinese yuan, commodity currencies and gold, a senior Kremlin official said on Tuesday.

>>> Allow me to rimind that the SDR was originally created to avoid CBs competing for scarce goldmetal and causing unwanted deflation through this competion.

"When foreign military spending forced the US balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances. The alternative by default was to invest their subsequent payments inflows in US Treasury bonds, as if these still were “as good as gold.” Central banks now hold $4 trillion of these bonds in their international reserves – and these loans have financed most of the US Government’s domestic budget deficits for over three decades now!

...Central bank governor Zhou Xiaochuan of the People's Bank of China wrote an official statement on its website that the goal is now to create a reserve currency “that is disconnected from individual nations.” This is the aim of the discussions in Yekaterinburg."

One already exists, and has for thousands of years. Surely they are aware of this.

"In addition to avoiding financing the US buyout of their own industry and the US military encirclement of the globe, China, Russia and other countries no doubt would like to get the same kind of free ride that America has been getting."

There lies the rub. There is no free ride with gold.

Freegold will judge harshly any nation attempting a free ride.

"An era therefore is coming to an end. In the face of continued US overspending, de-dollarization threatens to force countries to return to the kind of dual exchange rates common between World Wars I and II: one exchange rate for commodity trade, another for capital movements and investments, at least from dollar-area economies."

Two-Tier system? Paging alek_a...

Ultimately they will have to realize there is no free ride for anyone anymore. The fun zone is broke!

Anon, my truly thanks too.Even if I sometimes read global ca, this time I missed the article. Tonight I go to bed with some kind of a warm feeling that the world may find an exit from the American hegemony!It's not only a matter of Gold or fiat money but also its implications in warfare and poverty all around the world! Maybe Master Gold might help to eradicate some of the monstruosity of the actual system!Fauvi

The present US administration may well be unwilling and unable to risk alienating and angering BRIC members as deliberations proceed, for fear of losing crucial lending. Such negotiations and deliberations are going to be very tough for the US side. Thus, BRIC is rapidly moving into a strong negotiating position with respect to the US and Europe, and its members cleverly seek to consolidate their positions in key institutions and organizations.

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